Amazon and Netflix will kill SkyTV and it is all SkyTV’s fault

Guest Post

2 weeks ago

Guest post

I purchased a new TV earlier this year. It’s 55″, 4k and has an Android TV operating system. It cost me $899. I got it home and plugged it into both the internet and my Freeview antennae. Five minutes later I was watching Redbull coverage of the Dakar Rally streaming for free through the Redbull.tv app. I will write a digital UX design post on all the things the Redbull TV app has done wonderfully right, but that’s for another day.

Today I’ll tell you why my TV, and its app ecosystem of international giants like Amazon and Netflix, will kill SkyTV. I’ll also tell you why it’s SkyTV’s fault, not market forces, and what they could have done about it, starting last week.

Last year New Zealand news went crazy twice over rights to the national game: once in July, when Tom Pullar-Strecker dropped a brilliant article around Forsyth Barr suggesting Amazon could bid on New Zealand Rugby broadcast rights this year, and again in September, when New Zealand Rugby themselves confirmed they considered Amazon interested. All this furore around sport content’s production and distribution is interesting, but it misses two key points;

1. Though content is key, the method by which it is consumed is the doorway to subscribers. No matter how great the content is, if the door is ugly and inconvenient most will never walk through it.

2. There are other types of localised content beyond sport. SkyTV is neglecting the one real advantage I believe they have in the coming content/distribution war: they are a New Zealand company with mostly New Zealand-based employees and mostly Kiwi customers. And, Kiwis love buying Kiwi.

So, when I heard last week that SkyTV were announcing changes, I was looking forward to them stepping up. I went out of my way to watch the coverage, and then, live, on the national news they gleefully handed their subscribers a bowl of sick so awful looking it would have made Peter Jackson proud (click with care). Sure, they finally made some packages cheaper, and even created a couple of different base options. Choice is good, but only when it includes a choice you actually want.

If only they had realised that instead of having all the “balls” on Sport TV; they actually needed a few more in the board room.

In a great response, Paul Brislenpointed out that SkyTV’s business model needs to move away from channel-based content to on demand. Amazon understand this. If (when) they bid on the rights for rugby, it will be to sell the content on demand, and yes it could also be used to bolster some interesting international sports package. But, importantly, by removing irrelevant content (not sports) and by doing big games on demand, the package won’t be overpriced, and especially won’t be stuffed with content you can get for better value elsewhere.

By continuing to force people to buy overpriced and unwanted TV packages just so they can access sports content, SkyTV have shown that they believe blackmail is a valid business model. ‘That’s strong language!’ some might exclaim, and they could be right, but only because blackmail implies existence of strategy.

Except that model won’t work much longer. Their average monthly revenue is close to the cost of the full current sports package, so I am willing to bet that they have already lost a significant portion of the non-sports watchers to local and international on-demand services. International sports cannot be safe for long either, with lots of other options improving availability, like Redbull.tv pulling ex-sport watchers like me away (with a much cooler experience), international sports direct streams, pay subscriber streams through VPN (like hulu.com, sling.com and fubo.tv) and, of course, pirate streams. This just leaves the hook of localised sports content. Because of this, I conclude that they are only one lost battle away from losing this war altogether. If they lose rugby (or cricket) then they will be done.

It is important to understand that perception is reality, and both blackmail and ignorance make you lose trust with customers: something that is already happening. So, whether their demise is sudden or a long, slow self-absorbed blame fest, they are fast losing the social capital required for a reinvention, meaning their death will be real.

And, if that happens, who and what will suffer?

New Zealand-focused services wrapped around the mighty SkyTV Sports package is the obvious one – I cannot see Amazon resourcing local commentators and local sports shows with the same amount of zeal that SkyTV does, especially since Amazon would be cheaper and bring less revenue. As bad as this is I don’t think it is the worst thing we will lose; that will be the opportunity cost of SkyTV not growing into a bespoke creator of real New Zealand content. I am convinced that the real obligation of a cable TV provider to subscribers and shareholders is to become a producer, distributor and exporter of world-class content. New Zealand On Air, the New Zealand film and TV industry, and Kiwi viewers would welcome them with arms wide open.

Eventually, Disney will pull out of Netflix and start their own thing. Many believe that other smaller studios could follow by continuing to go direct online, and this will mean we will have to make more choices about what monthly subscriptions to buy. Four things will inform those decisions: the content itself, how it is bundled, what the engagement experience is like and how much we must pay. It is in this area I believe SkyTV is missing their real opportunity, and if they collapse before they can execute we will never see the benefit they could really represent to us.

So, what should SkyTV have done last week?

They should have launched an aggressive new timeline for digital change, content creation and on-demand programming. This timeline should have set out their strategy honestly and with respect for the needs of their subscribers. It should have included tons of new funding for New Zealand content and several already-inked deals. A blueprint for this already exists offshore with numerous cable networks around the world, and in on-demand with Amazon and Netflix originals. They should have released look-and-feel storyboards for new Kiwi viewer-aligned on-demand applications and, most importantly, they should have unbundled Sport.

In announcing plans for new New Zealand content, and a true New Zealand-focused platform, they could have put enough interesting new sizzle back into the business to once again inspire loyalty. Adding to that, if they were worried about the cost of content, they could partner with the globally recognised New Zealand film industry, and parley that into partnerships with other international networks; a New Zealand-owned private-sector content producer with its own network would generate massive market excitement. SkyTV make great sports (and peripheral) content, so with the right partners I cannot see why they wouldn’t make great dramatic content. With loyalty and excitement as a tailwind they could enable themselves to continue to sell New Zealand sport profitably without all the deception, and position themselves to be the preferred content aggregator for on-demand networks wanting to execute in New Zealand.

Another ‘Outrageous Fortune’ and a few Canadian (or similar) joint network series/movie productions exclusive to SkyTV could generate some massive local loyalty. ‘Outrageous Fortune’ only costed $5–10m per season to make, with SkyTV drawing nearly $300m per year in profit from subscribers. I think it’s a gamble that’s worth the risk.

Of course, there comes a time when we must wake up. SkyTV New Zealand cannot see past their hubris to any of the options that would best service New Zealand and, sadly, I think they are now doomed to die. You might say that they will eventually follow SkyTV UK’s partnership with Netflix, maybe even other platforms. This is probably inevitable, but it is low profit, and by not starting the journey with honesty and respect to subscribers before their coming rugby battle with Amazon they have likely squandered one of their last opportunities to get shareholders and subscribers to fund a reinvention.

With that I am signing off to go catch up on WRC 2018 Sweden, for free, on Redbull TV.

I have no affiliation with or ownership in SkyTV. I am not currently a SkyTV subscriber, and the opinions expressed in this piece are my own and not reflective of anyone else’s views. Quotes of other articles are all included with credit and links to original content.